Credit cards are almost a part of our lives. In fact, they are probably the most common plastic money cards being used by people in the developed world. But the concept of credit cards is not understood by many people. That is why many people find their cards being declined without prior knowledge. And this is why it is important for us to understand how the credit card works. We also need to know if there are alternatives for credit cards, and what advantages there are for using the credit card. Your Personal Financial Mentor explains how the credit card works, and gives you a list of the other cards that work similar to the credit card. Understanding this will be very helpful for you in making your choices of cards.
First of all, a loose meaning of the word credit is Loan or expense. When using a credit card, you are not withdrawing money from your bank account. Essentially, using a credit card is more like borrowing money from your provider or your respective bank. Therefore, every time you swipe your credit card, your bank is extending a Loan to you. This Loan is expected to be paid back within a given period of time, which may vary according to your financial institution. Sometimes it gets to a point where you are denied credit, which in loose terms means that you have lost trust with your credit card provider.
There are alternatives for the credit card too. One alternative is the debit card, which works almost the same way as an ATM card. In strict accounting sense, debit is the exact opposite of credit. When using as credit card, It always means that you are borrowing from your respective bank.
But when you use a debit card, it is almost as if you are you are using an ATM card. This is because the money is being withdrawn directly from your bank account. A debit cad is almost the exact opposite if a credit card. When you use a credit card, you are basically borrowing a Loan. But when you use a debit card, you are spending your own money
Its always your choice whether or not to use a credit card, but it is always important for your personal finance to make the right choice. If you have enough money in your account to push you through, then you’d rather not use a credit card.
Categories: Credit Cards